Lessons in surviving disruption: Gilad Tiefenbrun, Linn

The software engineer returned to his family's high-end Hi Fi business just as the CD was entering its death spiral. His solution? A £10,000 music streamer.

by Adam Gale

Published: 18 Nov 2016

Last Updated: 19 Nov 2016

In 2003, Gilad Tiefenbrun was a project manager at a mobile software company in London. An engineer by training, he’d moved there a decade ago from Glasgow, where his entrepreneur father Ivor ran Linn, a high-end Hi Fi business.

Linn was a British engineering success story, built on an obsession with reproducing recording quality as perfectly as possible. Ivor Tiefenbrun’s signature 1973 product, the Sondek LP12, had revolutionised the world of turntables, and in the decades since, the firm had stayed at the forefront of new technologies, most recently the CD player.

The younger Tiefenbrun had grown up around the business – ‘my early memories are of being kept up late at night with 10CC and Supertramp, as my father and his engineers compared the current version of the technology with some upgrade they’d come up with’ – but had no intention of ever joining Linn.

‘My dad told [Tiefenbrun and his siblings] that we weren’t going into the business because it wasn’t a family business, it was his business. He later explained he didn’t want us to feel we either had an obligation to join, or a soft option. He wanted us all to go and do our own thing and we did. I was the only one to come back.’

A vacancy came up for head of R&D in 2003, and Tiefenbrun’s father asked him if he’d consider applying for it. Though he and his wife were considering leaving London anyway, what drew Tiefenbrun to his father’s business was what he thought he could bring to it.

‘My dad was telling me about these new products they were launching, a new CD format called SA-CD. I said I didn’t think there was a future for discs – the software we were developing at the time was all about allowing phones to play real time media from the network. I saw clearly that Linn wasn’t gearing up for this technology. I felt very strongly that it should be and that I knew how to do it,’ he says.

The company Tiefenbrun joined in 2003 was very different from the one it had been when he was growing up. Linn had launched an ambitious debt-fuelled expansion plan in the late 90s, which had added management layers and nearly doubled staff numbers to well over 300.

He immediately set about trying to convince everyone they should make a streaming system to stand alongside their turntables and CD players – and one that wouldn’t play mp3s, which were associated with low quality reproduction, but instead the original master files.

It took a year to get everyone on board, and another three years before the product came out. The Klimax DS 2007 launched in 2007 – at a price of £10,000.

‘People told us countless times that no one buy would a music player that didn’t play mp3s, and certainly not for £10,000. But of course they did, because we understood our customer. Bringing access to the original recording for the first time would prove incredibly desirable to them.’

Tiefenbrun may have seen the way the future was shaping up, but unfortunately, it came too late to protect the firm from the effects of the financial crisis. ‘We were like the canary in the coal mine, because discretionary spending at the high end gets squeezed early,’ Tiefenbrun says.

Navigating the crisis

‘It was a very tough thing to let people go. We said the world’s changing, we need to be at the forefront of the streaming revolution, what do our customers want and how can we deliver that? By taking a strategy-led approach, everyone that remained was fully committed.’

Tiefenbrun describes this time as a return to the company’s core values. The streaming product was – like its turntable ancestor, which is still in production, and unlike its CD playing forebears, which are not – fully modular and therefore upgradable.

More importantly, Linn was returned to its original, flat management structure – the middle managers of the boom years were out.

‘Managers make engineers unhappy,’ says Tiefenbrun, who became managing director of Linn in 2009. It’s something he saw all too much of during his time in software development. ‘They do it by telling them what to do without actually understanding what they do. My philosophy is around how you structure management in a way that frees up creativity. How do you give engineers enough guidance so they know where they’re going without stifling them?’

Linn’s answer is to have no middle managers. Just team leaders, who continue to work as engineers or accountants, leading from the ground, reporting to four directors. Under the new structure, and with streaming as a clear focus, it’s enjoyed consistent growth since the crisis, buoyed in part by the resurgence of interest in turntables - sales and upgrades of which now contribute nearly 20% of revenues, the highest in 30 years.

The thorny issue of transitions

When Tiefenbrun became MD, his father became chairman. The transition of control in a family business is ever a risky time – how did they manage it?

‘We’re 13 years into our transition plan, and it’s still not finished. The person coming in really has to understand the concerns of the older generation. Be realistic and look at a long-term plan which involves very gradual transitioning of responsibilities, and then control, and then perhaps shareholding in the right order that keeps everyone on board, including the wider family – even those who aren’t in the business.’

Tiefenbrun also recommends setting up an independent board to manage the transition, and reading the literature about how others have handled it. ‘People think but my family’s different and my family business is different from everyone else’s, but it’s all been done before.’

Looking to the future, Linn is a manufacturing business at a time when some – including its founder – see great opportunities from Britain leaving the EU. Tiefenbrun is somewhat more diplomatic.

‘I’m an optimistic individual. There is a threat of higher costs of doing business in Europe and hope it doesn’t come to that, but there’s an opportunity for us to get into other markets that we’ve been shut out of by high tariffs. China’s got a 30% luxury tax we’re subject to; Brazil we can’t get into at all. There’s a whole world out there and my hope is we can get better trade deals to enable further geographic expansion.’

Tiefenbrun’s tips for manufacturing innovation

‘Who do you want to be? It’s a sustainable position to be the cheapest and it’s a sustainable position to be the best, but you’ve got to choose. We want to be the best at what we do, which means we accept those costs. The challenge is to deliver enough value on top that customers will pay for.

‘You need to understand where you can be the best, then look at the future to see what technologies will allow you to continue to improve. If everyone understands what your core intellectual property is, then everyone can be alive to the opportunities going on in the wider world, everyone’s enlisted in seeking out the technologies coming down the line that will improve the situation for your customers.’